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2009 (11) TMI 689 - AT - Income TaxValidity of Assessment order - survey proceedings - AO issued notice u/s 142(1) - parallel proceedings during the pendency of assessment proceedings - information gathered during the course of survey and post survey investigation, the AO issued notice u/s 148 which the assessee was required to file the return of income within 20 days from the date of service of the notice - HELD THAT - Power Under Section 142 was given to the AO for the purpose of making an assessment under the Income Tax Act. Section 142(1) starts with the wording 'for the purpose of making an assessment' under the Act, the Assessing Officer may serve on any person who has made a return or in whose case the time allowed under Sub-section (1) of Section 139 for furnishing the return has expired'. Thus, the proceedings Under Section 142(1) were initiated for the purpose of making an assessment. There is nothing on record to suggest that proceedings so initiated through notice Under Section 142(1) were either dropped or concluded. During the pendency of such proceedings, the AO has issued a notice Under Section 148. Before initiating proceedings Under Section 148, the AO has also issued a notice Under Section 142(1)(ii) vide which the AO called for certain details. Basically, such details can be asked only for the purpose of making an assessment. But the Assessing Officer cannot have jurisdiction Under Section 142(1) to call for the details unless the assessment proceedings or some other proceedings are pending. During the pendency of such assessment proceedings, the AO has initiated parallel proceedings Under Section 148 by issuing a notice Under Section 148. In the notice, the AO has mentioned that he is proposing to assess the assessee and require the assessee to file the return. Hence, it is not a case of re-assessment but a case of assessment. This impliedly suggests that proceedings initiated Under Section 142 were not concluded before the proceedings Under Section 148 were initiated. Notice Under Section 148 can be issued for making an assessment, re-assessment or re-computation. We are aware of the fact that in case the proceedings initiated Under Section 142 were dropped or concluded then it will mean the termination of the proceedings and the AO will assume jurisdiction Under Section 147 on the basis of information gathered during the course of survey. But no material was brought before us to say that the proceedings were dropped. Moreover, the survey has been conducted on 12th January, 2006. Notice Under Section 142(1) was issued on 18th October, 2006 i.e. after the date of survey. Hence, information gathered during the course of survey was available with the AO while issuing notice Under Section 142(1) on 18th October, 2006. Hence, after the survey, the assessment proceedings were still pending and during the pendency of such proceedings, the AO could not have issued the notice Under Section 148 of the IT Act. Assessing Officer intended to complete the assessment with reference to notice issued Under Section 148 of the IT Act. Hence, we are not agreeable to the contention of learned AR that the order should be read as passed Under Section 144 of the IT Act. Once it is held that the AO was not competent to initiate the parallel proceedings Under Section 148 then the assessment order passed in pursuance to such notice is invalid in the eye of law. Is that the AO has not issued a notice Under Section 143(2) after the assessee has filed the return? - return has been filed beyond the time limit prescribed Under Section 139(4) - Whether provisions of Section 139(4) can be imported into Section 148 to say that the return filed by the assessee beyond the period prescribed u/s 139(4) or beyond the period given by the AO vide notice u/s 148 is an invalid return? - HELD THAT - The words used in Section 148 in respect of application of provisions of Section 139 is that it shall apply so far as may be . The meaning of the words so far as has been considered by the Hon'ble Supreme Court in the case of Land Acquisition Officer, CITB v. Narayanaiah K 2. 1976 (8) TMI 149 - SUPREME COURT said that meaning of the words 'so far as they are applicable' used in Section 27 of the Bangalore Act, namely City of Bangalore Improvement Act, 1945, cannot be changed into 'in so far as they are specifically mentioned with regard to the procedure in the Land Acquisition Act, 1894. These words bring in or making applicable, so far as this is reasonably possible, general provisions, such as, Section 23(1) of the Acquisition Act. They cannot be reasonably construed to exclude the application of any general provisions of the Acquisition Act. Hence, we have to consider the applicability of 139 to the extent, as it is applicable. It does not mean that the provisions of Section 139 will be squarely applicable. The Legislature could have used the word that the provisions of Section 139 will be applicable, but they have used the word 'so far as' in that section. Section 234A(3) mentions that interest can be charged u/s 234A when the return is furnished after the expiry of the time provided in the notice. It will end on the date of furnishing of the return. This, therefore, squarely suggest that an assessee can file a return beyond the time prescribed in the notice issued u/s 148. Section 144 can be invoked if the assessee fails to comply with all the terms of notice issued Under Section 142(1). In the instant case, the AO has mentioned that the assessee has filed certain information on various dates but failed to explain all the queries raised by the department. Hence, this is not a case where the assessee has failed to comply with all the terms of notice. The AO has considered the explanation given by the assessee. If an assessment is to be made u/s 143(3) then the AO can consider the evidence which has been filed by the assessee and may consider all relevant materials which he has gathered. From the assessment order it is clear that the AO has completed the assessment u/s 143(3). This is also clear from MoU of the assessment order. Before us, the learned AR has not filed any rectificatory order to suggest that the AO has-treated the assessment made as made u/s 144. Hence, we cannot treat the assessment as an assessment made u/s 144. Since the assessment has been made u/s 143(3) without issuing notice u/s 143(2) after the receipt of return in response to notice u/s 148, the assessment order is not valid on this ground. Hence we hold that the assessment order is void ab initio and therefore is cancelled. Since we are cancelling the assessment order, therefore, we are not adjudicating the additions made by the AOr on merits.
Issues Involved:
1. Validity of the assessment order. 2. Issuance and validity of notices under Sections 142(1) and 148. 3. Requirement of notice under Section 143(2) after filing a return. 4. Jurisdiction of the Assessing Officer (AO) under Section 142(1) and Section 148. 5. Compliance with procedural requirements for completing the assessment. Issue-wise Detailed Analysis: 1. Validity of the Assessment Order: The assessee appealed against the order of CIT(A), questioning the validity of the assessment order. The Tribunal held that the assessment order was void ab initio and thus canceled it. The AO had issued notices under Sections 142(1) and 148 without concluding the initial proceedings, leading to parallel proceedings which were deemed invalid. 2. Issuance and Validity of Notices under Sections 142(1) and 148: The AO issued a notice under Section 142(1) on 25th January 2006, which was acknowledged by the assessee. Another notice was issued on 18th October 2006. The AO also issued a notice under Section 148 on 16th February 2007 during the pendency of the Section 142(1) proceedings. The Tribunal cited the Kerala High Court's ruling in Smt. Nilofer Hameed v. ITO, stating that notice under Section 148 cannot be issued if assessment proceedings are pending. The Tribunal concluded that the AO's issuance of notice under Section 148 was invalid as the proceedings under Section 142(1) were still pending. 3. Requirement of Notice under Section 143(2) after Filing a Return: The Tribunal noted that the return filed by the assessee on 19th November 2007 was beyond the time limit prescribed under Section 139(4) and the period allowed under Section 148. Despite this, the Tribunal held that the return could not be deemed invalid, referencing the Calcutta High Court's decision in CIT v. Banshidhar Jalan and Sons. The Tribunal emphasized that a notice under Section 143(2) is mandatory for a valid assessment, which was not issued in this case, rendering the assessment invalid. 4. Jurisdiction of the Assessing Officer under Section 142(1) and Section 148: The Tribunal discussed the AO's jurisdiction under Section 142(1) and Section 148. It was noted that the AO initiated proceedings under Section 142(1) and later issued a notice under Section 148 without concluding the initial proceedings. The Tribunal cited the Calcutta High Court's decision in CIT v. Soorajmull Nagarmall, supporting the view that pending assessment proceedings prevent the issuance of a notice under Section 148. The Tribunal concluded that the AO's parallel proceedings were invalid. 5. Compliance with Procedural Requirements for Completing the Assessment: The Tribunal highlighted the procedural lapses in the AO's actions. The AO failed to issue a notice under Section 143(2) after the assessee filed the return, which is a mandatory requirement. The Tribunal referenced various judicial precedents, including CIT v. Karnataka Vidyuth Kharkhane Ltd. and CIT v. C. Palaniappa, to support the view that the absence of a notice under Section 143(2) invalidates the assessment. The Tribunal also noted that the AO's proposal to complete the assessment under Section 144 was dropped, and the assessment was completed under Section 143(3) without following due procedure, leading to the conclusion that the assessment order was invalid. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the assessment order was void ab initio due to procedural lapses, including the invalid issuance of notices under Sections 142(1) and 148, and the failure to issue a notice under Section 143(2) after the filing of the return. The assessment order was canceled, and the additions made by the AO were not adjudicated on merits.
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